Oil Majors Fleece Nigeria With Inflated Project Costs

There is no better demonstration of how Nigerians suffer unduly on account of the padding of project costs by the International Oil Companies, IOCs, operating in the country than in the sudden request by the Nigerian unit of French oil giant, Total for a review of its Ofon 2 project.
Total Exploration & Production Nigeria, TEPN, Financial Vanguard reliably gathered, is seeking additional $3.78billion to an existing $2.85billion originally proposed for the project. If approved, this will bring total costs for the project to $6.63billion, representing a whopping 132.6 per cent increase, a development that is giving the Nigerian National Petroleum Corporation, NNPC, a majority partner in the Joint Venture, JV, grave concerns.
While cost padding is not peculiar to Total, as it cuts across all the multinational operators, this particular review stands out as the price of crude per barrel is being estimated above the $77.5per barrel being proposed by the Federal Government in the 2014 national budget; thus making Ofon 2 the most expensive project in Nigeria today.
Since November 2008, when the project was approved, Total has reviewed the costs twice, even as the project which should have been delivered in 2011 is still faced with a number of issues.
Ofon 2
The Ofon field is located in the Oil Mining Lease, OML 102, offshore Nigeria, in 40 metres water depth and is a Joint Venture development of the NNPC (60%) and Total E&P (40%). According to Total, "The main objectives of the Ofon Phase 2 project are to monetize the gas, develop additional reserves of oil and gas and drill 24 additional production and water injection wells in 2015.
"When completed, 106 million standard cubic feet (scf) of gas per day will be sent to the domestic gas market thereby boosting the Government's aspirations on power.
"The new project will also add approximately 40,000 barrels of oil per day to Nigeria's production."
Economic viability
Ironically, the National Petroleum Investment Management Services, NAPIMS, the investment arm of the NNPC, had in October 2010, declared the project of "no value to the Federal Government of Nigeria."